Economy Shrinks for Two Consecutive Quarters Despite Annual Growth in 2021

Mexico’s economy officially slipped into a technical recession at the close of 2021, recording two consecutive quarters of contraction. Despite achieving a 5% annual growth rate for the year, economic activity faced substantial headwinds.

Global supply chain disruptions persisted, hampering production in the country’s assembly plants. While COVID-19 infections had declined by late 2021 and health restrictions were minimal, economic performance remained sluggish.

Alfredo Coutiño, Latin America director at Moody’s Analytics, attributed the downturn to deeper structural issues. “The economy’s weakness stems from the long-term damage caused by the pandemic and the absence of effective recovery policies to boost productive investment,” he explained.

Data from Mexico’s National Institute of Statistics and Geography revealed a 0.1% economic decline in the final quarter of 2021, following a 0.4% contraction in the previous quarter. Analysts warn that the economic slowdown in the latter half of 2021 may impact growth potential in 2022.

Government policies limiting competition have also hindered private investment, further stalling recovery efforts, according to Coutiño.

Mexico recorded a sharp 8.4% economic contraction in 2020 due to the pandemic, making 2021’s 5% growth a partial rebound. However, projections for 2022 are more modest. The International Monetary Fund anticipates a 2.8% growth rate, with other analysts predicting a similar figure of 2.7%.

Treasury Secretary Gabriel Yorio acknowledged the lingering challenges, noting last week that the pandemic’s economic impact would continue to affect the country throughout 2022.